M/s. Das Mazumder Construction, Kolkata V. ITO, Ward 52(2), Kolkata

ITA 1441/KOL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2541 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 14-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 20-08-2009
• Court: TRIBUNAL
• Department Lawyers: R K PAL
• Assessee Lawyers: T K CHAKRABORTY; R K GOEL
• Keywords: Gift; Business expenditure; TDS; Set aside
• Section: 40A(3); 40(a)(ia); 201

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH - A , KOLKATA ( ) BEFORE . . , SHRI B.R.MITTAL, JUDICIAL MEMBER. /AND . . , , SHRI B.K.HALDAR, ACCOUNT ANT MEMBER / ITA NO. 1441/KOL/2009 / ASSESSMENT YEAR 2005 - 06 M/S.DAS MAZUMDER CONSTRUCTION, 26, CENTRAL ROAD, JADAVPUR, KOLKATA 700 084 PAN AADFD 3121 C - - - VERSUS - . INCOME - TAX OFFICER, WARD 52(2), KOLKATA. ( / A PPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / S/ SHRI T.K.CHAKRABORTY & R.K.GOEL / FOR THE RESPONDENT : / SHRI R.K.PAL / ORDER . . , SHRI B.R.MITTAL, JUDICIAL MEMBE R. THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2005 - 06 AGAINST THE ORDER OF THE LD. CIT(A) - XXXIII, KOLKATA DATED 29.05.2009 DISPUTING THE CONFIRMATION OF ADDITIONS/DISALLOWANCES MADE BY THE AO. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE A S UNDER : - 1. FOR THAT NEITHER THE AO NOR THE LD. CCIT HAD GIVEN ANY REASON TO INITIATE SECURITY PROCEEDINGS IN THE CIRCUMSTANCES OF THE PRESENT CASE. 2. FOR THAT THE LD. CIT(APPEALS) WAS UNJUSTIFIED IN HOLDING THAT THE ORDER WAS PASSED WITHIN THE STIPU LATED TIME. 3. FOR THAT THE LD.CIT(A) WAS UNJUSTIFIED IN GIVING OPINION THAT THE AO WOULD BE FREE TO TAKE ACTION IN THE HANDS OF THE RECIPIENTS OF THE GIFTS UNDER APPROPRIATE ACTION AS THE DIRECTION IS BEYOND HIS JURISDICTION. 4. FOR THAT THE LD. CIT(A) SHOULD HAVE ALLOWED THE DEDUCTION OF RS.60,000/ - & R.30,000/ - WRONGLY DISALLOWED BY THE AO U/S 40A(3) /ITA NO. 1441/KOL/2009 2 AND HIS DIRECTION TO EXAMINE AFRESH IS BEYOND THE JURISDICTION AS THE EVIDENCES ABOUT PAYMENTS THOUGH HAD BEEN PRODUCED BEFORE HIM. 5. FOR THAT DISALLOWAN CE OF LABOUR PAYMENT INVOKING SECTION 40(A)(IA) IS JUSTIFIED, ILLEGAL AND ARBITRARY. 6. FOR THAT DISALLOWANCE OF RS.1,60,000/ - GUFFAR MULLAH FOR PURCHASE OF BRICKS IS ILLEGAL, UNJUSTIFIED AND EXCESSIVE. 7. FOR THAT PAYMENT MADE TO CHOWDHURY AND SONS OF R S.1,75,000/ - IS EXCESSIVE ILLEGAL AND UNJUSTIFIED. 8. FOR THAT DISALLOWANCE OF RS.60,000/ - TO SUJIT SENGUPTA IS UNJUSTIFIED, ILLEGAL AND EXCESSIVE. 9. FOR THAT DISALLOWANCE OF RS.87,000/ - TO BANKU PAL IS ILLEGAL, UNJUSTIFIED AND EXCESSIVE. 10. FOR THAT DISALLOWANCE OF RS.23,100/ - OF DONATION IGNORING ADDITIONAL GROUND IS ILLEGAL, UNJUSTIFIED AND EXCESSIVE. 11. FOR THAT THE DISALLOWANCE OF RS.30,000/ - FROM BROKERAGE IGNORING ADDITIONAL GROUND IS ILLEGAL, UNJUSTIFIED AND EXCESSIVE. 12. FOR APPELLANT CRAV ES LEAVE TO AMEND OR ADD ANY GROUND OF APPEAL. 2. AT THE TIME OF HEARING THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT GROUND NOS. 1,2,3,4,5,7, 8 AND 9 ARE NOT PRESSED FOR. IN VIEW OF THE ABOVE, GROUND NOS. 1,2,3,4,5,7,8 AND 9 ARE REJECTED. 3. IN R ESPECT OF GROUND NO.6 OF THE APPEAL THE ASSESSEE THE ASSESSEE HAS DISPUTED DISALLOWANCE OF RS.1,60,000/ - MADE IN CASH TO GOFFAR MOLLAH ON ACCOUNT OF PURCHASE OF BRICKS. 4. IN REGARD TO ABOVE PAYMENT AGGREGATING TO RS.1,60,000/ - PAID TO GOFFAR MOLLAH, PR OPRIETOR OF M/S. RUBI ENTERPRISE, THE DETAILS OF THE SAME ARE GIVEN BY THE AO AT PAGE 2 WHICH ARE AS UNDER : - RS.25,000/ - PAID IN CASH ON 03.05.2004 RS.25,000/ - PAID IN CASH ON 13.07.2004 RS.25,000/ - PAID IN CASH ON 19.11.2004 RS.25,000/ - PAID IN CASH ON 07.03.2005 RS.30,000/ - PAID IN CASH ON 15.03.2005 /ITA NO. 1441/KOL/2009 3 RS.30,000/ - PAID IN CASH ON 29.03.2005 THE AO HAS STATED THAT CASH PAYMENT EXCEEDING RS.20,000/ - ON EACH OCCASION IN RESPECT OF THE ABOVE PAYMENTS WERE MADE AND ACCORDINGLY DISALLOWED 20% OF IT U/S 40A(3) OF THE ACT AND ADDED BACK TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE LD. CIT(A). 4.1. ON BEHALF OF THE ASSESSEE, IT WAS CONTENDED THAT THE SAID PAYMENT AGGREGATING TO RS.1,60,000/ - TO GOFFAR MOLLAH WAS MADE ON AC COUNT OF PURCHASE OF BRICKS WHICH WAS COVERED BY RULE 6DD (G) OF IT RULES. THE LD. CIT(A) HAS STATED THAT RULE 6DD(G) (WRONGLY STATED BY THE LD. CIT(A) RULE 6D INSTEAD OF 6DD) ADJUST PAYMENTS MADE IN A VILLAGE OR A TOWN NOT SERVED BY ANY BANK TO ANY PERSON WHO LOCALLY RESIDES OR CARRIED OUT BUSINESS FROM VILLAGE OR TOWN WHICH DOES NOT HAVE A BANK. THE LD. CIT(A) HAS STATED THAT THE ASSESSEE HAS NOT SHOWN THAT GOFFAR MOLLAH IS RESIDING IN A VILLAGE OR TOWN WHICH WAS NOT SERVED BY ANY BANK OR THAT MONEY WAS P AID IN SUCH A VILLAGE AND ACCORDINGLY CONFIRMED THE ACTION OF THE AO FOR MAKING THE DISALLOWANCE @20% OF THE ABOVE PAYMENT U./S 40A(3) OF THE ACT. HENCE THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING THE LD. AR STATED THA T IN THE RELEVANT ASSESSMENT YEAR CLAUSE (G) OF RULE 6DD PROVIDES THAT NO DISALLOWANCE UNDER SUB - SECTION (3) OF SECTION 40A SHALL BE MADE WHERE ANY PAYMENT IN A SUM EXCEEDING 20,000 RUPEES IS MADE OTHERWISE THAN BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT IN CASE WHERE THE PAYMENT IS MADE FOR PURCHASE OF PRODUCTS MANUFACTURED OR PROCESSED WITHOUT THE AID OF POWER IN A COTTAGE INDUSTRY, TO THE PRODUCER OF SUCH PRODUCT. THE LD. AR SUBMITTED THAT IN THE RELEVANT ASSESSMENT YEAR , CLAUSE (H) O F RULE 6DD DEALS WITH THE PAYMENT IN A VILLAGE OR A TOWN WHICH IS NOT SERVED BY ANY BANK. HE SUBMITTED THAT THE CLAIM OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW WAS THAT THE PAYMENT WAS MADE FOR PURCHASE OF BRICKS WHICH WERE MANUFACTURED LOCALLY AS COTT AGE INDUSTRY WITHOUT THE AID OF POWER AND HENCE SECTION 40A(3) WOULD NOT BE APPLICABLE IN RESPECT OF THE ABOVE PAYMENT MADE TO /ITA NO. 1441/KOL/2009 4 SHRI GOFFAR MOLLAH FOR PURCHASE OF BRICKS. HE SUBMITTED THAT THE ABOVE DISALLOWANCE IS NOT JUSTIFIED. 6. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW AND THE RELEVANT CLAUSES OF RULE 6DD OF IT RULES AS APPLICABLE TO THE ASSESSMENT YEAR UNDER CONSIDERATION. 8. WE FIND THAT THE LEA RNED CIT(A) HAS REFERRED TO RULE 6DD(G) OF THE INCOME - TAX RULES,1962. IN RULE 6DD , AS SUBSTITUTED FROM ASSESSMENT YEAR 2008 - 09 FOR EXISTING RULE 6DD BY INCOME - TAX (EIGHTH AMENDMENT) RULES, 2007 , CLAUSE (G) THEREIN READS AS UNDER : (G) WHERE THE PAYMENT IS MADE IN A VILLAGE OR TOWN, WHICH ON THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BANK, TO ANY PERSON WHO ORDINARILY RESIDES, OR IS CARRYING ON ANY BUSINESS, PROFESSION OR VOCATION, IN ANY SUCH VILLAGE OR TOWN; THE PROVISION IN CLAUSE (G) OF RULE 6DD AFTE R THE ABOVE AMENDMENT WAS VERY MUCH SAME WITH THAT OF THE PROVISION IN CLAUSE (H) OF RULE 6DD STOOD EARLIER, WHICH READS AS UNDER. ( H ) WHERE THE PAYMENT IS MADE IN A VILLAGE OR TOWN, WHICH ON THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BANK, TO ANY PERS ON WHO ORDINARILY RESIDES, OR IS CARRYING ON ANY BUSINESS, PROFESSION OR VOCATION, IN ANY SUCH VILLAGE OR TOWN; WE MAY OBSERVE HERE THAT, IN THE STATEMENT OF FACTS FILED BY THE ASSESSEE BEFORE THE LEARNED CIT(A), IN PAGE - 3 THEREOF, IT HAS BEEN STATED .T HE APPELLANT FIRM UNDER COMPULSIVE CIRCUMSTANCES HAD TO MAKE SUCH PAYMENTS WHICH IS WELL COVERED BY THE PROVISIONS OF RULE 6DD(H ). THE DISALLOWANCE SHOULD BE DELETED. FROM THIS, IT IS CLEAR THAT THE ASSESSEE CLAIMED THE PAYMENTS IN QUESTION NOT DISALL OWABLE IN VIEW OF RULE 6DD(H) WHICH IS VERY MUCH SIMILAR WITH THAT WITH RULE 6DD (G) IN THE AMENDED RULES AND ACCORDINGLY THE LEARNED CIT(A) HAS DECIDED THE ISSUE AND THEREFORE, THE ORDER OF THE LEARNED CIT(A) CANNOT BE FAULTED WITH. HOWEVER, B EFORE US, FOR THE FIRST TIME, THE LEARNED AR OF THE ASSESSEE STATED THAT THE PAYMENT OF /ITA NO. 1441/KOL/2009 5 RS.1,60,000 MADE TO GO F FER MOLLAH, PROP. OF RUBI ENTERPRISES WAS ON ACCOUNT OF PURCHASE OF BRICKS , WHICH IS A COTTAGE INDUSTRY AND BRICKS WERE MANUFACTURED WITHOUT AID OF POWER AND THEREFORE, THE PAYMENT IS NOT DISALLOWABLE U/S.40A(3) IN VIEW OF THE PROVISIONS CONTAINED IN RULE 6DD(G) OF THE ACT STOOD DURING THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION AND PRIOR TO THE INCOME - TAX (EIGHTH AMENDMENT) RULES 2007 ,. WHICH READS AS UND ER : (G) WHERE THE PAYMENT IS MADE FOR THE PURCHASE OF THE PRODUCTS MANUFACTURED OR PROCESSED WITHOUT THE AID OF POWER IN A COTTAGE INDUSTRY, TO THE PRODUCER OF SUCH PRODUCTS; CONSIDERING THE ABOVE PROVISION IN RULE 6DD(G) STOOD DURING THE RELEVANT ASSES SMENT YEAR UNDER CONSIDERATION , WE ARE OF VIEW THAT NO DISALLOWANCE UNDER SECTION 40A(3) WILL BE MADE WHERE PAYMENT IS MADE TO A PRODUCER ( IN THE PRESENT CASE GOF F ER MOLLAH, PROP. OF RUBI ENTERPRISES) TOWARDS PURCHASE OF HIS PRODUCTS IF THEY ARE MANUFACT URED OR PROCESSED WITHOUT THE AID OF POWER IN A COTTAGE INDUSTRY. THE LEARNED AR OF THE ASSESSEE THOUGH HAS NOT PLACED ANY MATERIAL ON RECORD TO ESTABLISH THE FACT THAT GOF F ER MOLLAH, PROP. OF RUBI ENTERPRISES RUNS A COTTAGE INDUSTRY, SUBMITTED THAT IT CAN BE PRODUCED IF THE MATTER IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IN ENTIRETY AND PARTICULARLY CONSIDERING THE CLAIM OF THE ASSESSEE THAT THE PAYMENTS MADE TO GOF F ER MOLLAH FALLS FOR CONSI DERATION UNDER RULE 6DD(G) REFERRED TO ABOVE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO DECIDE THE ISSUE AFRESH BY CONSIDERING RULE 6DD AS I T STOOD DURING THE RELEVANT ASSESSMENT YEAR AND AFTER CONSIDERING SUCH EVIDENCES AS MAY BE PRODUCED BY THE ASSESSEE AND AFTER GIVING OPPORTUNITY TO THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO CO - OPERATE WITH THE ASSESSING OFFICER IN FURNISHING REQUIRED EVIDENCES IN SUPPORT OF HIS CLAIM. GROUNDNO.6 OF THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN GROUND NO.10 OF THE APPEAL THE ASSESSEE HAS DISPUTED THE DISALLOWANCE OF RS.23,100/ - CLAIMED BY THE ASSESSEE ON ACCOUNT OF GIVING DONATIONS TO VARIOUS C LUBS AND PUJA COMMITTEES. /ITA NO. 1441/KOL/2009 6 9. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PARTIES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. 10. DURING THE COURSE OF HEARING THE LD. AR REFERRED TO PAGES 9 TO 15 OF THE PAPER BOOK AND SUBMITTED THAT THE AGGREGA TE AMOUNT OF RS.23,100/ - WAS PAID BY THE ASSESSEE TO VARIOUS PUJA COMMITTEES AND CLUBS WHICH WERE IN THE VICINITY OF PLACE WHERE THE ASSESSEE WAS CARRYING ON THE BUSINESS. HE SUBMITTED THAT THE SAID PAYMENT WAS MADE TO ENABLE THE ASSESSEE TO CARRY ON THE B USINESS SMOOTHLY IN THE BUSINESS INTEREST. 11. THE LD. DR HAS NOT CONTROVERTED THE ABOVE SUBMISSIONS OF THE ASSESSEES CLAIM AND ACCEPTING THE ORDERS OF THE AUTHORITIES BELOW. 12. ON CONSIDERATION OF THE ORDERS OF THE AUTHORITIES BELOW AND THE SUBMISSION S OF THE LD. REPRESENTATIVES OF THE PARTIES, WE OBSERVE THAT THE ASSESSEE HAS MADE SUCH PAYMENTS AGGREGATING TO RS.23,100/ - TO VARIOUS PUJA COMMITTEES AND CLUBS AS DONATION TO CELEBRATE FESTIVALS AND PUJAS. THE HONBLE CALCUTTA HIGH COURT HAS HELD IN THE C ASE OF CIT VS - BATA INDIA LIMITED 201 ITR 884 THAT EXPENDITURE INCURRED ON DONATION TO CELEBRATE FESTIVALS AND PUJAS IN THE VICINITY OF A SHOP TO KEEP THE YOUTH HAPPY IS AN ESSENTIAL EXPENDITURE AND IS TO BE ALLOWED. CONSIDERING THE ABOVE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE AGREE WITH THE LD. AR THAT THE SAID EXPENDITURE AGGREGATING TO RS.23,100/ - INCURRED BY THE ASSESSEE TOWARDS CONTRIBUTION TO VARIOUS PUJA COMMITTEES AND CLUBS IN THE VICINITY OF THE PLACE WHERE THE ASSESSEE WAS CARRYING ON HIS BUSINESS IS A BUSINESS EXPENDITURE AND THE SAME IS TO BE ALLOWED. THEREFORE, WE DELETE THE SAID DISALLOWANCE OF RS.23,100/ - BY ALLOWING GROUND NO.10 TAKEN BY THE ASSESSEE. 13. IN RESPECT OF GROUND NO.11 OF THE APPEAL TAKEN BY THE ASSESSEE, WE HAV E CONSIDERED THE ORDERS OF THE AUTHORITIES BELOW AND THE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES. WE OBSERVE THAT ON PERUSAL OF PAGES 16 TO 29 OF THE PAPER BOOK, THE COPIES OF THE VOUCHERS ON ACCOUNT OF PAYMENT OF BROKERAGE PAID TO FIVE DIFFE RENT PERSONS AGGREGATING TO RS.30,000/ - , NONE OF THE PAYMENT IS MADE TO /ITA NO. 1441/KOL/2009 7 AN INDIVIDUAL WHICH IS BELOW RS.2,500/ - . FURTHER IN THE SAID VOUCHER IT IS MENTIONED THAT PAYMENT IS ON ACCOUNT OF BROKERAGE. AT THE TIME OF HEARING, THE LD. AR CONCEDED THAT NO TDS WA S DEDUCTED BY THE ASSESSEE AS PER PROVISION OF SECTION 194H OF THE ACT. THEREFORE, WE HELD THAT THE AUTHORITIES BELOW HAVE RIGHTLY DISALLOWED THE SAID CLAIM OF THE ASSESSEE AS PER SECTION 40(A)(IA) OF THE ACT. HENCE WE UPHOLD THE ORDERS OF THE AUTHORITIES BELOW BY REJECTING GROUND NO.11 OF THE APPEAL. 14. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSES . THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 25.06.2010 SD/ - SD/ - ( . . ) ( B.K.HALDAR), ACCOUNTANT MEMBER . ( . . ), B.R.MITTAL, JUDICIAL MEMBER ( ) DATE : 25.06.2010 - COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT : 2 / THE RESPONDENT : 3. / THE CIT, 4. ( ) / THE CIT(A ), 5. / DR, KOLKATA BENCHES, KOLKATA 6. GUARD FILE . / TRUE COPY , / BY ORDER , / DEPUTY REGISTRAR . ( /H.K.PADHEE) / SNR.PRIVATE SECRETARY.